It is difficult to predict the return to normal production rates. It is even more difficult to know when the production volumes will be sufficient not just to alleviate the shortage effect, but also to recover the lost volumes. Auto Forecast Solutions had predicted a shortage loss of 2.6 million vehicles overall this year and has now raised this number to 4 million vehicles. AlixPartners predicts about 3.9 million vehicles lost for 2021, but that number seems very conservative given the magnitude and proliferation of supply disruptions. Ford announced a 1.1 million vehicle loss globally for this year at the group level. Therefore, the 2021 loss of volume could reach 7 to 8% compared to the initial global forecasts. This means 6 to 7 million vehicles missing for 2021, and the pessimistic scenario of a 10% loss (8.7 million vehicles) could very much become realistic.
Amidst the second quarter of the year, there’s a lack visibility as to when the supply of electronic components for the automotive industry will return to normal. Inventories are low, and replenishing them will take time, as will serving customers who are waiting to replace their vehicles. The North American automotive market is constrained and is unlikely to make up for lost volumes before 2022 if not 2023. Automakers will certainly have to revisit their launch schedules and be patient to get out of this situation. It remains to be seen what lessons will be learned in terms of procurement, purchasing policy, parts inventories, and the consideration for proper strategic intelligence.
A serious revamp of the global chip production is now being in the mind of everyone. As it sits, US is only producing 12% of the global chip supply and Europe at 10%. China has planned a 150-billion-dollar investment to increase its production. Taiwan’s TSMC invested 28 billion to add new lines. But it may take decades for the US to reach the ideal target of producing 30% of the global microchips to become self-sufficient, as the US was producing 37% of the global production share of semiconductors and microelectronics in 1990. It shows the importance of a long-term strategy for sensitive industries, and the need for appropriate strategic intelligence.
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